Menu

Yale Investment Model for a Millennial

David Swensen is the Chief Investment Officer at Yale University. Swensen is responsible for managing Yale’s endowment fund and investments, and is one of the most respected investors.

He has averaged 13.9% annual returns, giving him the best track record of any institutional investor.

So, how exactly does David Swensen invest Yale’s endowment funds? Is it possible for the average individual investor to achieve similar results of this institutional investor? Absolutely. Follow along and I’ll show you which Vanguard funds David Swensen uses in the Yale Investment Model.

What should a Millennial make of all this? Well, I strongly advise that Millennials be more aggressive since time is on our side. A Millennial really should be in a 90% stock / 10% bond portfolio until they are 20-25 years from retirement. So for most of us Millennials that means being invested at a 90/10 model until we’re 40-45 years old.

For example, I am in my early 30’s and still at 90/10. I don’t plan on on shifting to more bonds until I am 40-ish. At that time I’ll probably go to 85/15 or possibly 80/20. I am striving for an early retirement at age 60, so I have to be aggressive but also safeguard my assets as I get older.

Now back to the “Millennial” version of the David Swensen Yale investment model. As stated above, Swensen believes in 70/30. A bit conservative for a Millennial. So let’s up the equities by 20% and take that from our bonds. I love real estate and REIT’s a lot, but a 20% allocation to REITs is already plenty. No need to increase that at all. A lot of financial pundits will tell you that is too high as it is. I think its just right.

US equity: 30% 35%

Foreign developed equity: 15% 20%

Emerging market equity: 5% 15%

US REITs: 20%

US Treasury bonds: 15% 5%

US TIPS: 15% 5%

I think this is a great retirement portfolio option for a Millennial. Outside of Jack Bogle and Warren Buffett, David Swensen may be the next most respected investor.